WAL-MART: Rising competition from Amazon and Costco.

WAL-MART SWOT Analysis – 2016

Presented here is a SWOT analysis of Walmart (NYSE: WMT).

Fortune 500 rank – 1

CEO:  C. Douglas McMillon

Number of Employees: 2,300,000

Competitors: Costco, Target, Amazon, Best Buy, BJ’s Wholesale Club, Ebay

[Check Fresh Stats on Walmart for 2018] Go to [SWOT ANALYSIS OF WALMART 2018]


Wal-Mart’s business approach has changed a lot recently. Based upon this change, the company has gained  in terms of customer base and financial strength. Wal-Mart showed significant improvement in several areas apart from becoming the second largest online retailer after Amazon. Improvements were marked in areas like IT and HR too.
The wages Wal-Mart has been paying its workers were known to be the lowest in the industry. Continued protest from diverse groups pressed Walmart to change its policies. Apart from it, the brand has also made significant investments in IT. The US division saw its sales rising as well as improvements in customer service.  Its food business constitutes more than half of its sales and the company has shifted its focus towards organic and fresh food mainly.

Despite all these achievements, there remain some big challenges before the brand. The growth of Walmart E-commerce is behind its main rivals. Its Sam’s club unit is also facing significant competitive pressure from Costco and is struggling to keep up. More than anything else, a strong US dollar internationally has affected the profits of its international division.

[Must Read: Strategic analysis of Walmart]


A few words about Wal-Mart before moving on to SWOT:
Walmart has been the target of severe criticism and attacks regarding its supply chain and human resource policies including wage policies  in the past. However, there is still enough reason that Walmart can be considered good for America. Its size has always enabled it to provide what the other retailers cannot. The retail giant has efficiently devoted its strengths to the American consumer. While being criticized for depressing wages and for its Bangladeshi suppliers, the retailer has still provided the American consumers the biggest benefit – the lowest prices. Undoubtedly, Walmart means smart retail and its size is a major factor that enables the brand to do the unbelievable things it does.

 Below is a SWOT of Wal-Mart, the retail giant:

 

Walmart SWOT 2016
Walmart swot analysis

Walmart Strengths:

  • Brand Image
  • Financial strength
  • Sharp growth in the recent years
  • Excellent infrastructure
  • large customer base
Walmart’s main strength is its brand image. It has been on the Fortune 500 list for 22 years and is known to be one of the biggest retail brands in the industry. Financially  it is in a  very strong position. During the recent years, Walmart made some remarkable changes to its approach. This change has resulted in an increase in profits and revenue. Overall, in the recent years it achieved sharper growth in profits and revenue. The brand has an excellent IT infrastructure in place to support its fast pace of growth. Apart from that in US as well as internationally the brand has acquired quite a large customer base.

Walmart Weaknesses:

  • Thin profit margins
  • weak HR record
  • Some of its brands are facing stiff competition
  • Slow  growing e-commerce
Walmart has adopted the ‘EDLP’ pricing strategy. This is also its key point of differentiation. Under the EDLP strategy, it keeps the everyday prices for its products low. While this strategy helps the brand achieve large sales, the margins remain relatively thin compared to the competitors who sell at higher prices. Apart from that, the brand does not have a very good record in terms of HR either. It has always tried to compensate for the thin margins by paying the staff less. Some of its brands like the Sam’s Club are struggling against their rivals. In the area of E-commerce too Wal-Mart’s  growth is weaker compared to Amazon.

Walmart Opportunities:

  • Improvement in HR policies
  • Expansion into the emerging Asian markets
  • Partnership with the local brands in the emerging markets
HR is an important area where the brand can make major improvements. It has not been able to achieve something highly significant in terms of HR apart from improving the wages recently. A large scope for further changes still remains in terms of improving the work conditions and employee morale. The emerging Asian markets also present major opportunities for the brand. It can gain by forming strategic partnerships with the local brands in these markets.

Walmart Threats:

  • Competition from rivals in and out of US
  • stronger Dollar internationally affecting profits

Being a big brand is not easy and the brands like Walmart have to face significant competition domestically and internationally. Competition poses a major threat to Walmart and especially that from Amazon and Costco. Another major threat is that of a stronger dollar. A stronger dollar internationally means that the profits will be low for Wal-Mart. The recent years saw dollar grow stronger internationally which meant that the profits of the international division of Wal-Mart had to suffer.


Recommendations:
Apart from focusing more on E-commerce, Wal-Mart needs to revive its Sam’s Club strategy. There is also a need to attend to other needs like working on improving employee morale to make the brand image stronger. Overall, Walmart has been doing well in terms of low prices. However, it’s time that it made serious attempts to revive the brand image which has been tarnished by its continued lack of attention to the human resource issues.

Walmart Stats : Walmart Revenue & Number of stores